Friday, September 28, 2012

While being
interviewed on the Today Programme this morning, Martin Wheatley proved that he
was going to be no more effectual as a lead regulator than any of his spineless
predecessors.

He was being quizzed
about the new regime for supervising the LIBOR market (about which see below),
but at the very end of the piece, he was asked whether he would like to see banksters
who engage in antics such as the mis-selling of PPI insurance, prosecuted and
sent to jail. His answer was that such people were made to pay the money back,
but he demurred when it was pointed out that thieves in other sectors who stole
money were not only required to pay it back but went to prison as well.

His answer was that
the word 'thieves' was a strong term, and that in their (FCA's view) misselling
was, and I quote; '...inappropriate
conduct which was a long way short of fraud...'

How can we possibly have
any faith in a man to regulate one of the most criminogenic markets in the
world, when he manifestly demonstrates that he understands so little about the
criminal law, or the public attitude towards the organised criminal cess-pit
that is the UK financial sector?

This is exactly the
same kind of twitchy, lily-livered, fearful attitude towards penalising city
crime that has bedevilled the regulation of our financial markets in the past; and
which has made the Square Mile a byword for every kind of skulduggery, thievery,
fraud, money laundering, institutionalised tax evasion, and general cut-purse
activity.

It is exactly this
kind of pathetic approach towards financial wrong-doing that is ensuring that
the American regulators do not trust us, and who are increasingly being forced
back on their own resources to go after the global criminals who find such an
easy home in London.

For the record, Mr
Wheatley, any mis-selling activity is nothing less than institutionalised fraud
at its widest scale. That is why this kind of inflated criminality had to be
called 'mis-selling' in the first place because the Government just did not
have the moral courage to call it by its real name, 'criminal fraud', for fear
of what such a description would do the future of the London market.

When an industry
sector is forced to set aside in excess of £10 billion to recompense victims of
such crimes, you can hardly call this simply 'inappropriate conduct'! In these
few short words, Wheatley, you sent a loud message this morning to every
bankster, con-man, huckster and snake-oil salesman that under your regime, it's
business as usual. You gave every single one of them a 'get out of jail card
free' and none of them will have any illusions but that they are free to carry
on defrauding ordinary people out of money they can ill afford to lose on some
frolic dreamt up by the organised mafias and criminals who run Britain's banks.

The whole interview
this morning with Wheatley was an exercise in the 'same old, same old'! It contained all the tried and trusted
shibboleths, it talked about the need for new processes and procedures to help
regulate the LIBOR market. It talked about the importance of the LIBOR
structure and what needed to happen to make sure it was never abused again.

The interviewer repeatedly
tried to get Wheatley to focus on the question of using the criminal law to
bring pressure on the bad guys, and to contemplate using prison as a real deterrent.

Wheatley squirmed,
he wriggled, he demurred and he obfuscated. He tried to avoid answering the
questions about prison sentences. Eventually, grudgingly, he agreed that prison
might be a suitable option for sentencing, but a long way after fining and
banning from the industry, and then only in the cases of what he called
'extreme fraud'!

Quite what this man
thinks manipulating the LIBOR market is and has been for so many years is, if
it isn't extreme fraud, I am not certain. How much more extreme does it have to
become? He admits that LIBOR is very
important as a price setting mechanism, he admits its outcomes have impacts on
many areas of financial standards, but for some reason, he is not prepared to
see that this activity might fall within the area of 'extreme fraud'

Then why does he
think the SFO are conducting an investigation if such activity is not extreme
fraud?

He clearly does not
understand that the only way to regulate a financial market in a way that the
hucksters and lob-lolly men who abuse it really fear, is to make them
understand that if they break the criminal law, they will be arrested, charged
and tried at the Central Criminal Court.

On one issue, Wheatley
is quite clear. He doesn't want to have any responsibility at all for supervising
the control of the new LIBOR regime. Oh that doesn't mean he hasn't got all
kinds of plans and schemes for it, lots of good bureaucratic plans are afoot.
This is what Wheatley himself has said about it;

"...Firstly,
reforming the current framework for setting and governing Libor. This will
include how banks submit data, and whether actual trade data can be used to set
the reference rate; the governance of Libor; and whether the setting of Libor
should be brought into statutory regulation.

We will also look at alternative
rate-setting processes and the financial stability consequences of a move to a
new regime and, how a transition might be appropriately managed.

Thesecondarea we’ll look at how we work out the
best way to tackle abuse. This will consider the scope of the UK authorities’
civil and criminal sanctioning powers to deal with the type of misconduct we’ve
seen. We'll also look at whether individual persons in banks with a role
in Libor setting should be subject to prior approval by the
regulator.

Andfinally, we’ll look at
other areas where price-setting mechanisms are used in financial markets and
whether we need to make policy changes. We’ll make provisional
recommendations designed to inform the work on benchmark reform being
considered globally..."

Well, that's alright then! Lots of good
processes and procedures there to get teeth into. But who is going to oversee
it all? Not the BBA that's for sure, and this is probably a good thing. The BBA
in recent years has been little more than the talking shop for the various banks'
interests, a lobbying group, bought and paid for by its members.

On Radio 4 this morning, Wheatly said he
hoped that someone would step forward to want to oversee the new LIBOR
structure. Asked why the FCA was not the right agency, and you could almost feel
his anxiety to dispel that suggestion right away.

No, he said, we are regulators, not market
practitioners. He wants to oversee the actions of others, but just as with his
predecessors in title, he doesn't want to have any responsibility for ensuring
that the new structure works properly. He will say how it should work but he
doesn't want to be placed in direct charge of it.

Of course not, that way he might end up being
judged on his effectiveness as a regulator and that would never do, because the
public might think he wasn't up to the job if he failed in some way!

Just like the SIB and the FSA, the new FCA
doesn't want to be given any responsibilities by which it can be measured by
empirical standards. This is the prerogative of the whore, power, but without
any responsibiity!

Listening to Wheatley this morning, I
experienced the same sinking feeling that I used to experience when I heard
Hector Sants telling the financial markets to be very afraid of him, or when I
heard Adair Turner turning a simple explanation into three paragraphs of
complex gobbledegook!

The fact is that we are back to square one
again, with a regulator that has no desire to be held responsible for its
actions; which cannot understand why stealing people's hard-earned money is not
a crime when it is done by a bank; which has no stomach for using criminal
sanctions to put errant executives behind bars; and which wants to do a lot of
talking and liaising and exchanging information, and travelling to foreign
conferences, but absolutely sweet fuck all about putting the bad bastards who
have given the London market the cess-pit reputation it has acquired, in jail.
God help us all!

Thursday, September 20, 2012

New York regulators
are investigating whether several major U.S. banks failed to monitor
transactions properly, allowing criminals to launder money, according to
a New York Times story. The newspaper cited officials who it
said spoke on the condition of anonymity. The Office of the Comptroller of the
Currency, the federal agency that oversees the biggest banks, is leading
the money-laundering investigation, according to the Times. The
report said the OCC could soon take action against JPMorgan Chase &
Co. and that it is also investigating Bank of America Corp.

When the money laundering regulations first started to
make themselves felt in the global banking sphere, the first thing the banks did
was to set up a howl of protest (par for the course), whingeing about how
impossible it would be to monitor their client accounts for the purposes of
identifying suspicious financial transactions.

Lest there be any doubt about it, the requirement to monitor
financial transactions in order to be able to identify suspicious payments was
something that no bank wanted to do. Banks don't make money by playing at being
adjunct agents of the law enforcement community, they make profits by attracting
as much money as they can get their dirty hands on, from what ever source, and
providing discreet and confidential banking services to the beneficial owner.

Bankers are morally blind when it comes to the provenance
of money, because like Bernie Cornfeld once said, '...money has no smell...'
Well, alright Bernie didn't say it originally, the Roman Emperor Vespasian did,
but it has the same meaning whoever said it!

Banks are adept at ignoring those rules and regulations
which either damage their ability to make money or which get in the way of
profit. When it doesn't suit them, they will ignore a rule, and it requires a
very strong regulator to make them toe the line. Sadly we have not been blessed
with such an agency in the UK for too many years.

There has been a considerable volume of technology
available for many years to enable banks to apply strong measures to identify
suspicious financial transactions.

One of the biggest mistakes that the makers of this
software made when developing its capability was that the banks would actually
want to use it. Nothing could have been further from the truth. However, they
were faced with a problem. Once the regulators were aware of the existence of
anti-money laundering transaction software, they started factoring that into
their inspection checklists.

There should be no reason why, in theory, that transaction
monitoring software should not be a significant support mechanism for the
compliance function.

Most systems rely on the development of complex algorithms
to determine the likelihood of a transaction being suspicious or otherwise.

I
do not necessarily think that these systems are as helpful as the systems that
examine a bank's accounts as a whole on a daily basis and analyse changes in
account values, volumes and transaction velocities, to determine potential
suspicious transactions.

Such systems work by being closely mapped to the
individual institution's risk-based policy, (this always assumes that the bank
has bothered to calculate such a document), and by tailoring the sensitivity of
the different risk rules as closely to the risk policy, to ensure the
minimisation of too many false positives, which are the bug-bear of any
monitoring system.

Part of the problem was that banks simply were not
prepared to spend any money on hiring staff who could or would take the time
and the trouble to analyse the transaction alerts properly. Some banks merely
disclosed every alert the system identified, on the basis that by disclosing
everything, they could not be accused of failing to comply, and that the sheer
volume of alerts reported to the law enforcement authorities would so clog up
their work-flows, that they would never have the time to get round to actually
analysing much of the disclosed material.

So banks began by hiring lots of young kids to become
transaction 'analysts', on the basis that by providing the appearance of
compliance, would keep the regulators happy. It became a cost of doing business
to install a transaction monitoring system, but once it was implemented, very
few institutions bothered to take the trouble to make sure it worked
efficiently.

Money laundering compliance works because regulators are
prepared and willing to take the necessary steps to ensure that the underlying
regulations are being complied with.

In the UK, the regulator has published two major reports
in which it has reviewed the willingness of banks to comply with the Money
Laundering Regulations. Its findings, on both occasions, demonstrated that
banks were simply ignoring the letter and the spirit of the laws, in return for
grabbing as big a chunk of the world's criminal money as possible.

The US authorities can not complain if they find that
major US banks have been ignoring the money laundering regulations and failing
to use transaction monitoring software properly, because why should US banks
behave any differently from their UK counterparts?

Now, with the findings against HSBC for the handling of
billions of Mexican drug dollars, and the way in which other banks such as
Standard Chartered were willing to flout the laws on US sanctions, thus
laundering other criminal money, (other banks including RBS are in the pipeline
for criminal sanctions for this offence), it is about time that the US regulators
started to take a closer look at the level to which these regulations are being
enforced, and where necessary, come down heavily on the banks who are playing
fast and loose.

The only thing that will bring the world's banking
community into line are criminal convictions aimed at the leading practitioners,
chief executives, chief operating officers, chief financial directors and above
all, the Chairmen of these criminal organisations. A few doses of strong
porridge will have a salutary effect!

Sunday, September 09, 2012

I have been reviewing the way in which UK banking and
those who regulate it all seem to be members of a private cosy private club,
who are always available to be called upon to step up and take another
lucrative role on each other's Boards when something nasty hits the
air-conditioning! My friend Ian Fraser has commented on this phenomenon before
and better than I can, but I think it is still worth repeating.

One of the most obvious and shameful outcomes of the
Financial crisis has been the way the regulatory agencies have failed to deal
with the evidence of greed, perfidy, and wholesale criminality which has marked
out the conduct of business in our major financial institutions. It is only
when we come to deconstruct the structure of these organised criminal
enterprises, and they are very much a group of mafias, we can begin to
understand the way in which they rely on each other for support in times of adversity.

What we can begin to glimpse is the level of 'regulatory
capture' which exists in this unholy alliance, a phenomenon defined as the process by which regulatory agencies
eventually come to be dominated by the very industries they were charged with
regulating. Regulatory capture happens when a regulatory agency, formed to act
in the public's interest, eventually either acts in ways that benefit the
industry it is supposed to be regulating, or it fails to act in order to protect
the public.Regulators
when they step down from their roles, can virtually always rely on a soft
landing and a lucrative sinecure waiting for them among either the institutions
they have formerly been supervising, or within the Big 4 audit firms whose
actions in so many cases have contributed to the wrong-doing of which their
financial clients have later been accused.

With the Retail
Distribution Review (RDR) and break-up of the Lead Regulator going on in the
background, some big names decided it was the best time to move on, in most
cases to more lucrative opportunities.

Peter Smith the Financial Services Authority’s
(FSA) head of investment policy left his position at the FSA in June to
take up a position with Dubai’s regulator, Dubai Financial Services Authority.

Dan Waters, the former director of
conduct risk and asset management sector leader, announced his departure towards
the end of 2010 after he decided he could not make the necessary long-term
commitment through the set-up of the new regulatory regime. He had previously
been head of retail policy and was therefore one of the masterminds of the RDR.
He is now Managing Director of ICI Global, a trade body set up last
year focusing on the Global Fund Industry

Jon Pain left as head of supervision
in 2011 after he decided there would not be a suitable role for him
in the restructured organisation. Having joined in September 2008, he was
responsible for developing the new regulatory approach after the financial
crisis. He moved on to KPMG in July as head of financial services within the
risk consulting division.

Sally Dewar the former managing
director of risk and board member left the FSA after three years in the role,
having originally joined in 2002. Dewar had been responsible for all regulated
markets, including the regulation of firms ranging from banks to asset
managers, and she moved on to JPMorgan Chase as a managing director.

Katharine Leaman, was formerly the
manager of the FSA's professional standards policy team, and left the
regulator after more than a decade at the organisation. She became part of the
20-strong professionalism and RDR team in Canary Wharf in her last two years. A
former Gerald Edelman director, a firm of chartered accountants, she is now a senior manager at the Royal Bank
of Scotland.

Margaret Cole, left at the end
of March after almost seven years with the FSA, most recently as managing
director. She had originally joined as director of enforcement in July 2005 and
had led the move to a more aggressive approach, heralding a period of record
fines and activity. As the first managing director within the financial conduct
unit, she was already shaping the future regulation of financial
advisers. She will join PwC in the autumn as an executive board member.

See what I mean! But the revolving
door moves in both directions.

Take the appointment of KPMG chairman John Griffith-Jones
who has been appointed non-executive chair designate of the Financial Conduct
Authority (FCA), the body that will replace the Financial Services Authority
(FSA).

Griffith-Jones joined the FSA board on 1
September as a non-executive director and deputy chair. He will work with FCAchief
executive-designate Martin Wheatleyto
oversee the creation of the new regulator. Adair
(Lord) Turner will remain FSA executive chairman until the move to the new
regulatory structure has been completed.

Financial
secretary to the Treasury Mark Hoban said Griffith-Jones would play a key role
in financial services regulation. 'He understands the challenges facing the
financial services sector and this, together with his experience in both
chairman and CEO roles, will be very valuable as we move towards the creation
of the FCA.'

Griffith-Jones
said he wanted to help rebuild consumers' trust in financial services in his
new role. 'Having worked in the financial world throughout my professional
career, I know how important it is that consumers, investors and businesses
have trust in the integrity of the UK's financial services industry and
markets,' he said.

He
should know, having been in an executive position at KPMG for many years. Just
look at the first page of any search engine using the search terms '...KPMG and
Scandal...' and see what comes up. Among the entries I found were the
following;

'...KPMG
accounting scandal...Corporate scandals exposed...'

'...KPMG
tax shelter fraud...'

'...K{MG
charged with fraud...'

'...KPMG
obstructed US tax enquiry...'

You
get the gist. Many of the scandals took place in the US and he well may say
quite reasonably he was not directly involved. but he was still part of an
executive power within the world-wide entity, and these scandals took place on
his watch! No doubt his Eton and Cambridge education will have given him a wide
insight into the views and concerns of the ordinary man in the street. still
smarting from being mis-sold a PPI insurance contract, or having had his
private pension scheme raped by his provider!

We
should be grateful perhaps that he will be joined by Martin Wheatley. Head
of the Financial Conduct Authority, Martin Wheatley has every reason to be
committed to the regulator’s more intensive style of supervision.

Wheatley worked for the London Stock Exchange for 18
years, including six years on its board. He rose to the position of deputy
chief executive, and was closely involved with the failed merger with Deutsche Borse..

Later, Wheatley's tenure at the helm of Hong
Kong’s financial regulator the Hong Kong Securities and Futures Commission saw
thousands of investors take to the streets in protest, brandishing pictures of
Wheatley with devil horns and burning effigies of him outside his office after
they were mis-sold complex structured products linked to Lehman Brothers.

Wheatley was later criticised by the Hong
Kong legislative council in summer 2012 for not having demonstrated sufficient
sensitivity to the needs and perceptions of general investors. The report went
on, '...the Committee is greatly disappointed that Mr Wheatley had not secured
the enactment of the relevant amendment legislation in a timely manner...'

Sounds like he is ideal for the new
regulator, of which Adair (Lord) Turner is still at the helm, of course. Now
this man is a real revolving door product!

In a hard-hitting article in the Daily
Telegraph in August 2012, Damian Reece declared;

'...It’s not just the bankers that need
changing but the regulators too...'

In reviewing the findings of the Tyrie Committee he pointed out
that '...what we’re also left with, yet again, is a story of regulatory
failure. Since 1997 the UK has been plagued by porous rules that have allowed
unalloyed avarice to seep into every nook and cranny of City life.

The Tyrie committee's investigation has quite rightly used its
findings into the Libor scandal as ammunition in its attempts to get urgent
changes made to the legislation passing through Parliament that will merge two
failing institutions (the Financial Services Authority and the Bank of England)
into one, even larger, failing institution. If we don’t get the future of regulation
right, we’ll never get the future of banking right.

Tyrie’s report also reveals how Lord Turner and his counterpart
at the Bank of England, Sir Mervyn King, were unable to exercise judgment-based
regulation properly when it came to the removal of Bob Diamond. The fact that
Lord Turner tried and failed to secure Diamond’s resignation and subsequently
had to get Sir Mervyn involved also exposes him as a weak operator. Put this
together with the fact that the FSA, along with the Bank, failed to spot Libor
manipulation in the first place and that “doesn’t look good” to quote Tyrie
once again. It doesn’t look good for the FSA but neither does it look good for
Lord Turner’s candidacy to be the next Governor of the Bank of England, with
supreme power over all financial regulation.

On 8th September 2012, Lord Turner authored an article in the
Daily Telegraph entitled '...Regulators must shine a light on 'shadow banking...
in which he is quoted as saying '... Shadow banking thus played a crucial role in the 2008 crisis
in both the US and Europe. We need to ensure it cannot do so in future...'

Frankly, the problem for Lord
Turner is that he is far too clever for his own good, and his articles read
like some detailed briefings prepared for an IMF summit meeting of Central Bank
Heads. At one stage he posits:

'...Maturity transformation is also a key
driver of banking system risk: but at least when it is performed within bank
balance sheets it is reasonably well measured and liquidity regulation can
constrain it. Equivalent maturity transformation achieved via a multi-step
chain of intermediation is equally
risky, but more difficult to spot and it escapes liquidity regulation...'

Of course, how
silly of me not to have appreciated that, and I imagine that when small
investors meet to wonder why their returns are so pathetic, they talk of little
else!

These Telegraph
articles invite readers to respond with comments. One reader posted as follows:

'... What he's trying to say, but has failed miserably by dressing it
up in incomprehensible long-winded gobbledegook, is the too big to fail, (and
soon too big to bail), [ I would have added too big to jail ] banks, aided and
abetted by insurance dealers like AIG, have fucked up big time by
overleveraging themselves in the totally unregulated OTC derivatives market and
are relying on taxpayers to fund their very real potential losses should the
tangible asset prices bubble be allowed to burst and find its true level.

The Bank for
International Settlements estimates this underworld derivative market to be in
the order $600 trillion - others estimate $1.4 quadrillion. Nobody knows
because it is not regulated. I would have expected this Turner fellow to
know this much at least.

In essence what
the taxpayer is being asked to do is to live with artificially high house
prices and negative interest rates in order to prevent the triggering of credit
default insurance which would almost certainly bring the entire edifice of crap
down around their ankles. Don't even ask about Interest Rate Swaps...'

Well, I think
you can see his point, now why couldn't Lord Turner have put it like that?

Another pointed
up Turner's revolving door credentials;

'... Pity
really that Turner did not know about all this before the event and warn us of
the dangers. He was in a position to know and could have warned us, as he
worked for Chase Bank (now part of J P Morgan), Mc Kinsey and Merrill Lynch,
all involved in setting up and running vital parts of the shadow banking food
chain.

Maybe he was
too busy when the threats became obvious to say anything - by then he was
involved in helping to rob £ billions from people who were promised state
pension benefits which will not now be paid. This despite them paying
contributions into the system for decades. Would you trust a person like this...
?'

And finally, what about Barclays, the leading organised mafia enterprise
for banking criminality. Well, the bank has surpassed itself by appointing two
insiders to the most important roles to clean up after the passing of the
Diamond geezer!

Anthony Jenkins, who ran Barclays
Retail and Business Banking and has been a member of the group's executive
committee since 2009 has been given the top job as CEO. The announcement came a
day after Barclays said the Serious Fraud Office was investigating the bank
regarding certain payments between the bank and Qatar Holding, during an
exercise to raise more investment capital. The inquiry relates to events in
2008, when Barclays was raising money from Middle East investors during the
banking crisis.

In June, it was fined £290m by UK
and US regulators for manipulating Libor, an interbank lending rate which
affects mortgages and loans.

Jenkins said he was "very proud
to have been asked to lead Barclays", where he began his career nearly 30
years ago, but he admitted: "...We have made serious mistakes in recent
years and clearly failed to keep pace with our stakeholders' expectations..."

Well, again, he should know. It was on
his watch that Barclays was fined £7.7 million for failures in
relation to the sale of two funds.

Between July 2006 and November 2008
Barclays sold Aviva’s Global Balanced Income Fund (the Balanced Fund) and
Global Cautious Income Fund (the Cautious Fund) to 12,331 people with
investments totalling £692 million. Barclays promised to contact customers and
pay redress where appropriate.

They
were also required to repay thousands of customers who had been damaged in the
PPI mis-selling scandal, and have been under investigation for the mis-selling
of swap derivative products to hapless customers. So no doubt Mr Jenkins will
know where the other bodies are buried.

But
he will be helped by a man who has undertaken more turns of the revolving door
than most, as it was announced that Barclays
chairman Marcus Agius would be be replaced by Sir David Walker. Among some of the
earlier roles, Sir David has been engaged in are;

None of this permits me to hope that
there will be any realistic review of the British banking sector. The Great and
Good have been drafted in to try and patch up the leaking hulk that is Barclays
bank, while other former regulators who were in post at the time of the 'light
touch approach' to banking regulation have scuttled off the sinking ship to find
themselves lucrative sinecures.

I do not believe that any of these
reforms and putative changes will ever have any realistic effect on cementing
belief in the banking system any more. We have all been screwed royally and the
guilty are now sunning themselves and enjoying their vast pension funds, given
to them as a bribe to keep their mouths very tightly shut about what really
went on.

But that is always the way with the
British, nothing will or must change! The bank and finance sector exists to
serve the interests of a very special few insiders, it does not and never has
existed to really serve the interests of GB plc, that is just a convenient
fiction they put about to stop Government enquiring too closely into what
really goes on inside the Square Mile or up in Edinburgh.

But in order for the money-go-round
to keep on producing the goods for the insiders, they have to keep a lid on the
rotten edifice, so that no-one can really tell what is going on and that is
where the revolving door comes in. And as long as the revolving door continues
to turn, spinning out the good chaps with the safe pairs of hands to fill the important
posts when they are most needed, then those on the inside track will always get
the plum jobs and fill the juicy posts, secure in the knowledge that they will
do the job they are called upon to perform which is to maintain the status quo,
while all the rest of us can merely do is to lick our wounds, and wait humbly
until it is our turn to get fucked over again!

Friday, September 07, 2012

The present Government policies on the use and
possession of illicit drugs have failed utterly.

As a former detective in the Metropolitan
Police, I saw at first-hand how the policies of criminalising people for
possessing and using proscribed drugs resulted in wholly discriminatory and
socially-excluding enforcement, whereby the young, the marginalised and black
communities were targeted, while the white middle-class users of illicit but
socially-accepted narcotics were ignored and allowed to continue virtually
unmolested.

More to the point, as an active detective
focusing on financial crime and money laundering, I realised that by insisting
on enforcing the policy, drug criminalisation was helping to pour a torrent of
raw cash into the pockets of organised criminals. The more we criminalised the problem, the
more money the drug pushers made, while the resultant costs of crime escalated.

It was the most futile and ridiculous policy,
but no-one had the courage to challenge it publicly, because politicians on
both sides of the House of Commons were scared to engage in a real debate, for
fear of alienating the opinion forming leader writers in the scaremongering
media.

CLEAR, an independent organisation which calls
for Cannabis law reform published an article on 27th July 2012 discussing the
kind of writing being published by the Daily Mail, one of the most vociferous
opponents of drug reform. They stated;

"...Kathy
Gyngell is an ex-producer of downmarket daytime TV. She now styles
herself with the pretentious and misleading title of ”Research Fellow” at
the Centre for Policy Studies. She has no qualification or basis for any authority
or expertise on cannabis except for a shameful record of publishing article
after article in that epitome of inaccurate and misleading journalism, The
Daily Mail. The nonsense she writes is based on prejudice and a deliberate
intent to mislead. She publishes lies about cannabis and about scientific
research concerning cannabis on a regular basis..."

The Home Office too had set its mind against
any form of debate, and indeed, any informed person in a position of public
authority who has dared to challenge the status-quo, finds themselves being
marginalised. Professor David Nutt was a classic example.

Professor David
Nutt, head of the Advisory Council on the Misuse of Drugs, criticised the
decision to reclassify cannabis to Class B from C.

He
accused ministers of devaluing and distorting evidence and said drugs
classification was being politicised. Following his sacking, Prof Nutt told the
BBC he stood by his claim that Cannabis should not be a Class B drug based on
its effects.

He
described his sacking as a "serious challenge to the value of science in
relation to the government". He went on to say;

"We can
help them. We can give them very good advice, and it would be much more simpler
if they took that advice rather than getting tangled up in other sorts of
messages which frankly really do confuse the public."

Prof Nutt said
he was not prepared to "mislead" the public about the effects of
drugs in order to convey a moral "message" on the government's
behalf. ..If scientists are not allowed to engage in the debate at this
interface then you devalue their contribution to policy making and undermine a
major source of carefully considered and evidence-based advice."

My conversion
to the belief that the prohibition of drugs was simply not working was when I became actively involved in the issue of interdicting
money laundering, and seeking to prevent the profit flows from the narco-trade.
Trying to stop banks handling the obscene profits from the drug trade made me
begin to realise the real truth. The anti-money laundering laws were routinely
flouted by the banks, because the flow of drug money was so important to their
bottom line. Frankly, without the drug trade, many medium-sized banks around
the globe would have gone out of business years ago.

David Malone on
his 'Golem' blog outlines some very important facts about the drug business.

"...The retail end of the global drug
trade is by far the largest, at an estimated $332 billion. All of it has
to be banked one way or another. It get’s washed in London and New York, and
the people who do it are criminals. They are also very wealthy, very arrogant,
and they have friends in government , the police and the judiciary.

A report published by the Home Office in 2006 estimated the UK
drugs market to be worth £4.645bn in 2003/4. Most of that £4.6 billion had to
have been banked. Not just in one year, but that amount annually. That bit does
not get talked about so much. £4.6 Billion a year is more than a rogue teller
or two. When we get to retail in the West we are not just talking about banking
a fist full of tenners from a dirty looking user or pusher. We are talking about the people
the pushers work for, the people they in turn work for and the businesses that
they ‘work for’ or own, which then use that money for ‘legit’ investments, such
as buying luxury property in London.

The reality is that drugs are a massive banking business. And it is
also a fact that the bulk of that business is done in the industrial nations in
their banks, the Drugs business is mostly a western business. It’s a banking
business.

We, the rich West, use it, we finance it, we provide the laundering
services for it, and we then use the money it generates to feed the financial
system. That money keeps our banks going, especially in ‘hard times. That money
is what is used by the financial industry to speculate with, to buy up
sovereign assets with, to speculate on food with. That money helps create their
bonuses and pays off our politicians in ‘soft donations’ and ‘access to
decision makers’.

The drug money
laundering business is a staple and important part of global banking. Money
laundering is one of the things bankers do well. They should do, they practice
it every day. It is not a one off rogue clerk or rogue office. It is not
something the bank does once and never again. Amex has done it many times. HSBC
has a long history. It has most recently set aside $700 million to pay fines
for laundering drug money from Mexico.

Dig deep enough
and you’ll find the names of politicians, senior ones and find yourself meeting
some of the people who make sure the truth of such matters does not come out
and whose job it is to protect the guilty and do their dirty work.

Drug money,
criminal at the start, is criminal and dirty no matter how many times it is
laundered. The bankers know this better than anyone. Yet they do it every day,
every week, every year and every decade in every major financial centre and
everyone knows it. It could reasonably be said that the global banking business
has become truly drug dependent.

In the UK drug cash is more recently generally
calculated by HMRC to be now in the region of £6.5 billion, annually. It is
only when you appreciate the size of the narco-cash flows that you begin to get
a handle on just how big and how widely extended illicit drug taking is.

Yet, most children at our schools have
experienced drug sales taking place in their grounds. Many of them have taken
drugs during school time. At university, it is almost a sine-qua-non that drugs
are routinely available in every hall of residence, depending on your narcotic
of choice. Many young people prefer to drop Ecstasy prior to going out because
pills are cheaper than the alcohol they would have to buy at the club.

This is one of many reasons why the so-called
war on drugs is an abject failure and continuing along this road of
criminalisation is a hugely expensive waste of valuable police time and
resources, the estimated costs in 2007 alone being in excess of £14 billion a
year!

That is one of
the many reasons why we urgently need an evidence based, health focussed
approach to drug policy and for the decriminalisation of drug possession, and
why I am proud to be associated with the efforts being made by Law Enforcement
Against Prohibition (LEAP) to promote this outcome.

Sunday, September 02, 2012

On Monday 3rd
September I am attending the 30th Anniversary of the Cambridge International
Symposium on Economic Crime.

I have been
fortunate to have been associated with the Symposium for 29 years and I have
been invited to present many papers and
chair a number of breakout sessions.

The brainchild of a
brilliant Cambridge law Don, Dr Barry Rider, the Symposium has been the best possible
sounding board for international law enforcers and financial and economic crime
policy makers to meet in the delightful surroundings of Jesus College, Cambridge,
and to discuss issues of mutual concern.

I want to quote from
the invitation letter written by Dr Rider to explain the significance of this
important, indeed unique event.

"...The
annual Cambridge International Symposium on Economic Crime is not just another
conference!

It
would not be celebrating its thirtieth year if it were! Over the years, the
Cambridge Symposium has established itself as a unique vehicle for promoting,
at a truly international level, greater understanding of the real and practical
issues involved in preventing and controlling economic crime, corruption and
abuse, and thereby facilitating meaningful co-operation...It seeks to involve
speakers and panellists with practical knowledge and
experience from around the
world who can not only share their expertise, but also act as catalysts in
promoting awareness and discussion at all levels within the Symposium.

The
primary theme of the Conference addresses some of the myths and realities in
terms of risk and its management, of the consequences – both direct and
indirect, of the international financial crisis and the near collapse in
confidence as to the integrity of many of our financial institutions. At a time
when many agencies that have been criticized for failing to act sufficiently
robustly are being restructured or replaced, there are profound uncertainties
not only for those in the regulatory and enforcement sectors, but also for
those in the regulated communities.

We
are not, however, concerned only with the identification of such risks, but
also their management and containment. During the week we will address a host
of issues that threaten stability and integrity and in particular the insidious
threats presented by organized crime, fraud, corruption and money laundering...Consequently
the
programme is of very real relevance
not only to those involved in law enforcement and supervision, but all those
who are concerned to maintain integrity and protect business whether in the
public or private sector.

For
me, it is a matter of some considerable concern that Dr Rider has opened the
doors of Jesus College for 30 years, and the great and the good, as well as a
lot of rough-hewn and hardened cops have walked through to debate the
phenomenon of international economic crime.

When
we started, Financial Crime was not an issue for debate in the UK, there were
no financial regulations to speak of, the City was regulated by the City,
subject always to the dubious effectiveness of the Prevention of Fraud Act
1953, implemented largely by the ineffectual Department of Trade and Industry
(DTI).

The rest of the Fraud regime was largely investigated and prosecuted by
Police from the Fraud Squad. There were certain frauds in the VAT and Tax
sector which were investigated by Customs and Excise or the Inland Revenue, but
the vast majority of fraud prosecutions were brought by Police.

The
City of London would have been deeply affronted to have been invited to come
and discuss the issue of crime within their hallowed walls. It was not an issue
it wished to discuss and the whole place was governed by an arcane set of rules
imposed by the City fathers, and overseen by the rebuke of last resort, the
height of the Governor of the Bank of England's eyebrow! If any activities
needed the attention of the Police, the City fathers used to rely on the services
of their own fraud officers, who, while theoretically being a part of the joint
unit of the Metropolitan and City Police Company Fraud Department, tended
largely to look after things inside the City walls without overly bothering
their Met colleagues!

The
major issue for debate in those early years was the difficulty we Fraud Squad
officers faced in acquiring evidence from certain unwilling persons who did not
want to cooperate in our enquiries.

We
desperately wanted to be given powers similar to those possessed by the DTI to
demand access to the books and records of a company under investigation, and to
require them to answer questions about their accounting methods.

Some
of us even gave evidence before the Roskill Commission which enquired into the
way that Fraud Trials were conducted and how improvements could be made in
1986.

From
those early days, and following the proposed reforms in the Roskill Report, the
investigation and the management of Fraud has now proliferated into a rash of
initials and departments, among whom it is hard to determine any meaningful
cooperative activity.

Among
the many agencies which now exist to deal with fraud in the UK and in Europe
are the following;

The
Fraud Advisory Panel is an independent body of volunteers drawn from the public
and private sectors. Members include representatives from the law and
accountancy professions, industry associations, financial institutions,
government agencies, law enforcement, regulatory authorities and academia.

SOCA
was created by the British government in April 2006. It has taken over the
functions of the National Crime Squad (NCS), the National Criminal Intelligence
Service (NCIS), the role of HMRC in investigating drug trafficking and related
criminal finance and some of the functions of the UK Immigration Service (UKIS)
in dealing with organised immigration crime. In addition it now includes the
function of asset recovery.

This
website is published by the National Working Group on Fraud on behalf of the UK
Association of Chief Police Officers (ACPO). The website deals primarily with
commercial fraud in a policing context.

The
Committee on Standards in Public Life was set up in October, 1994. Its terms of
reference are: To examine current concerns about standards of conduct of all
holders of public office, including arrangements relating to financial and
commercial activities, and make recommendations as to any changes in present
arrangements which might be required to ensure the highest standards of
propriety in public life.

The
FSA regulates the financial services industry and has four objectives:
maintaining market confidence; promoting public understanding of the financial
system; the protection of consumers; and fighting financial crime.

A
website produced by the British Government in cooperation with HSBC, Microsoft,
the Serious Organised Crime Agency and other organisations to give advice on
problems ranging from computer viruses and spam to online rip-offs and identity
fraud.

It
describes itself as "the financial conscience of the European Union.

The
Metropolitan Police Fraud Squad.

The City Police Fraud Squad.

The various Fraud and Commercial
departments of the other police constabularies in the British Isles.

Her Majesty's Revenue and Customs.

The Office of Fair Trading.

I am certain there may be others
whom I have overlooked, but my point is this.

In the attempts to reduce the
incidence of fraud, financial crime and money laundering, have we not been guilty
of creating a massive 'talk shop' in which more time is spent debating and
discussing the relative merits of individual agencies in dealing with crime, as
opposed to getting on with the job of dealing with it?

The Cambridge Symposium on Economic
Crime cannot be blamed for the development of this cat's cradle of competing agencies.
Repeatedly the Symposium has called for
a greater degree of clarity and cooperation in the interdiction and prosecution
of major fraud.

Sadly, these eminently sensible
requests have not been heeded, and we have now ended up with an edifice which
has become more convoluted than a Mandarin Chinese Court.

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!